More than 45 percent of small businesses fail in their first five years.
Even if your business looks healthy, you don’t want to assume anything. A rocky economy, changes in how you make business, or simple mistakes can ruin even the most reliable company.
Minimizing your business’s risk of failure is one reason you might consider applying for a business loan. A loan might help you take your business to new heights. After all, what’s better, investing your own money or some strangers?
However, one of the biggest reasons people suffer from false negatives is the company’s fault. Errors in business loan applications are often where they start. How do you avoid those common mistakes? Read on for a quick guide.
1. Inaccurate or Incomplete Information
One of the most common errors in business loan applications that business owners make is providing accurate or complete information on their application forms. This can result in loan rejections or delays in the loan application process.
Ensuring that all the information you give is accurate and up-to-date is crucial. Double-check your application form before submitting it to provide all the required fields are filled out.
2. Not Having a Solid Business Plan
Lenders want to see a solid business plan before approving a loan application. This should outline your company’s goals, objectives, market analysis, financial projections, and strategies to succeed.
Lenders may only see the value in investing in your business with a business plan. Invest time and effort into creating a thorough and well-thought-out business plan.
3. Poor Credit History
Your credit history is an essential factor that lenders consider when reviewing your loan application. Poor credit history can significantly impact your chances of securing a loan.
Ensure you have a good credit score and a solid credit history before applying for loans. If you have a poor credit score, take steps to improve it, such as paying off outstanding debts and bills.
4. Lack of Collateral
Collateral is an asset that a borrower handles protecting in the event of defaulting on the loan. Ensuring that the asset is enough in size and value to cover the loan amount is vital. To avoid this standard error when applying for SBA loans, the first step is to assess the value of the collateral offered.
This assessment should include an accurate estimate of the asset’s value and an analysis of its ability to cover the proposed loan amount. Additionally, providing extra security can help to reduce the risk of being denied a loan due to a lack of collateral.
5. Applying for the Wrong Loan
There are different types of business loans and each has its eligibility requirements and repayment terms. Applying for the wrong kind of loan can result in rejection or not getting the funds you need. Do your research, read loan terms and conditions, and choose the loan that best suits your business needs.
Stop Making These Errors in Business Loan Applications
Applying for a business loan can be a complicated process. Avoiding these common errors in business loan applications can increase your chances of securing the funds you need to grow your business.
Remember to provide accurate and complete information, have a solid business plan, maintain a good credit history, offer collateral when necessary, and choose the right type of loan. Doing so will give you a better chance of getting the loan you need to achieve your business goals.
Do you want to find more helpful info? Check out more of our guides on our blog today!
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